Any meaningful change requires enough Americans deciding that they really do want less government in their lives, and then acting accordingly.
The country lacks a critical mass of citizens disposed to support the hard decisions that would enable America to rein in its national debt.
F or one brief moment in the news cycle, the size of America’s national debt was back in the public eye. Alas, while the Treasury Department’s January announcement that America’s total public debt had passed the $30 trillion mark attracted some critical commentary, the topic quickly started to recede from public discussion.
I wish I was surprised, but I’m not. The reaction was similar when the national debt surged past the $20 trillion level back in September 2017. After considerable huffing and puffing about the event’s historic character alongside much lamenting about government fiscal irresponsibility, people’s attention wandered elsewhere.
This pattern indicates that, despite polling indicating that most Americans are worried about the size of the country’s public debt, it’s not something that many Americans (let alone Congress) are anxious to tackle. That, I’d suggest, tells us something about how America has changed over the past 50 years.
The U.S. public debt has always played an oversized role in America’s history. The creation of a national public debt helped, after all, to establish America as a sovereign entity that united the fractious states more tightly in the 1790s. That was one reason that Alexander Hamilton wanted the federal government to assume responsibility for the states’ Revolutionary War debts. This helped establish America’s public credit at home and abroad, and thereby attracted capital to a country desperately needing it. Creating a national public debt also gave each state a common stake in the nation’s public finances.
Over the next 150 years, that public debt enabled America to do some spectacular things. These ranged from purchasing 828,000 square miles of territory from Napoleon’s France in 1803, to providing the financial muscle that helped the Allies crush Nazi Germany and Imperial Japan in World War II. The public debt was never envisaged, however, as a means for papering over ad infinitum the fiscal gap that emerges when people want Washington to expend regularly immense sums on direct state assistance — the vast bulk of federal expenditures today — to citizens but don’t want their taxes raised to pay for it.
In 1795, Hamilton flagged the relentless buildup of debt as “perhaps the natural disease of all governments. And it is not easy to conceive anything more likely than this to lead to great and convulsive revolutions of Empire.” Hamilton was undoubtedly thinking of France, where serious mismanagement of state debts had brought the Bourbon monarchy to its knees and helped precipitate the French Revolution. But as someone deeply read in history, Hamilton also surely had in mind how failure to control state debt had contributed to Imperial Spain’s decline as a world power and, even further back, the deterioration in Rome’s ability to govern its empire.
Fortunately, a prudent approach to public debt generally prevailed throughout 19th-century America and well into the 20th century. This was a time in which American presidents and legislators bragged about their successes at cutting state expenditures. The federal government regularly produced more annual surpluses than deficits. That helped keep the public debt quite low as a percentage of GDP.
Before 1980, Americans experienced only five brief periods of rising debt levels. One was the result of Franklin Roosevelt’s effort to stimulate an ailing American economy via the New Deal. The other four occasions involved the financing of major military engagements such as the Civil War and World War II. In these instances, however, successful efforts were immediately made to get federal spending under control as part of a debt-reduction exercise once the emergency had passed.
In the 1980s, we entered a different world. America’s public debt as a percentage of GDP started accelerating under Ronald Reagan and George H. W. Bush, underwent a slight decline under Bill Clinton, and then escalated again under George W. Bush, Barack Obama, Donald Trump, and now Joe Biden.
The reasons for this trend are not complicated. If you don’t reduce government spending, don’t enjoy spectacular economic growth, fight several wars, don’t increase taxes, and respond to a major financial crisis and a global pandemic by spending trillions of dollars, one way to square the circle is to borrow — big-time.
Absent major fiscal reforms or a long economic boom, pressures to borrow even more will magnify as America’s population ages, its birth rate declines, and its Social Security and health-care costs grow. In fact, America is already borrowing to make interest payments on the national debt. In July 2021, the Congressional Budget Office warned that America was on pace to see interest payments becoming the federal budget’s fastest-growing segment. Nor can we assume, as Brian Riedl notes, that interest rates will stay low. In fact, the more America borrows, the more likely it is that interest rates will increase.
Even some big-government-friendly economists concede that if America’s national debt continues growing at its present pace, it will become a major drag on growth. Fed chairman Jerome Powell summarized the situation well when he told Congress in January: “Debt is not at an unsustainable level, but the path is unsustainable — meaning it’s growing faster than the economy, meaningfully faster than the economy.”
The growth of such a debt is likely to increase the price of capital and thereby start crowding out private-sector investment in the economy, not to mention public-sector investment in activities such as national defense that are unquestionably the state’s responsibility. It also risks igniting a major financial upheaval, should enough investors start questioning the U.S. government’s creditworthiness.
All this points to a hard question with a disturbing answer. In the past, America was able to get its public debt back under control. Why do we struggle to do so today?
Partly it is because legislators, including many conservatives, have few incentives to do so. Diminishing the public debt today through real spending cuts would mean real reductions in ongoing big-ticket federal programs: i.e., income security, Social Security, health, Medicare, etc. Selling that to the millions of Americans — including many conservative Americans — who benefit from one or more of these outlays is hard.
But this also indicates that, for all our government-skeptic rhetoric, Americans have become habituated to the state’s permanently undertaking many activities that go far beyond any reasonable conception of limited government. Even worse, we don’t want to acknowledge the cost. Hence, while many Americans might accept the need for debt reduction in theory, they don’t want restraints applied to the particular programs that benefit them or people that they know and love.
In short, America presently lacks a critical mass of citizens disposed to take the long-term view and support the hard decisions that would enable America to rein in its national debt and return it to the purposes for which it was intended. Any meaningful change requires enough Americans deciding that they really do want less government in their lives, and then acting accordingly.
That being the case and all other things being equal, I’m confident we’ll be reliving this conversation in a few years’ time when we hit the $40 trillion mark. And that is as much a sign of deep inertia in the American body politic as it is an indication of fiscal apathy and negligence. We have only ourselves to blame.